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I just thought of this while reading some stories about US budgets in coming years. What happens if the US derfaults on it's debts? I mean what would the real consequences for the Global Economy be? I am guessing that if it were to happen, the Great Depression of the 30's would look like a boomtime because the US would drag the rest of the word down with it. At that point, I might even feel prescient were I to have a stock of weapons and ammunition on hand.I bring this up because I can see it coming that the US refuse to be reasonable about spending and thinks it can just keep on printing money. I dont worry so much about deflation so much as hyper-inflation. It seems self-evident to me that the US must balance it's bboks and decide what is really important, if not, then events will ost likely decide for us. We cannot as a nation continue to run trillion dollar deficits, sanity must prevail. The question is though, what happens if the dollar collapses?
That's a good question. I'm not so sure what would happen. Hopefully – just, hopefully – it would compel the Obama Admin to cut spending. Unfortunately, I fear that it would only compel it to engage in even more spending under the guise of “needed” government intervention to prop up the markets. Our only real hope is that significant Republican gains in the fall will thwart such plans for increased government spending, and hopefully we can get someone into office in 2012 who will respect the natural flows of capitalist forces. Obama is in a self-imposed dicey situation; if he keeps spending, he will bring the nation even further into economic chaos; if he cuts spending, he risks alienating the people who voted for him because he promised them everything and the kitchen sink at the government's expense (remember the whole "if Obama wins I won't have to worry about paying my mortgage" comment?). I fear he will choose the former option.
What will happens next with China ?http://news.bbc.co.uk/2/hi/8207174.stm
China like many countries has adjusted their currency without regard to the rest of the world on occasion, they seem to have the idea that they can also call the tune on the world standard of exchange. What would it be? The Euro? Most nations trade the dollar or the pound simply because they are fairly stable and the US and the UK don't jimmy with the value, rather letting the market set the exchange.China is soon to be the big dog in the fight but with so many little dogs around can they pull it off?
Both the Eurozone countries and the US need to gang up on China and force them to let the overvalued Yuan float. China is manipulating the market to their favour and being blatant abvout it. If the US or Euro countries did the same thing the Chinese would scream bloody murder and unfair trade practices. If it would not hurt us more than China I would hope for a US default. But then, I also take the principled stand and will not buy Chinese if there is an alternative, even if it means I pay more as it usually does. For some reason, I don't like Communists or Communism. I blame Reagan for that.
